Linear Algebra: Section 1.6 Applications
Assume a corporation has a taxable income of $37,650,000. At this income level, the federal income tax rate is 50%, the state income tax rate is 20%, and the local income tax is 10%.
If each tax rate is applied to the total taxable income, the resulting tax liability for the corporation would be 80%. However it is customary to deduct taxes paid to one agency as expense before computing taxes for the other agencies. For example the federal taxes are based on the income that remains after the state and local taxes are deducted, and the state and local taxes are computed in similar fashion. What is the total tax liability for the corporation?
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